Promotion is the component of the marketing mix strategy that emphasizes the use of various communication tools to promote the value of your company, products or services. While much of promotion is focused on long-term communication objectives, sales promotions have a specific motive of creating immediate sales.

Attract Customers

Sales promotions are typically used as a price inducement to attract price-conscious buyers not interested in products a regular prices. This is common when companies want to build a customer base, such as at a grand opening, when a competitor goes out of business, or in a highly competitive industry. In some cases, sales promotions on one product, known as a "price leader" or "loss leader," are used to get customers into the store so you can sell them other, more profitable items.

Increased Revenue

Increasing revenue is a common goal for sales promotions. Often, sales promotions restrict your profit potential, but they allow you to generate more revenue in the short run due to increased sales volume. This also means more cash flow, which is why companies struggling to meet near-term financial obligations often turn to discounts. To realize greater revenue, you need more customers to buy more product at the reduced price.

Price Orientation

One of the more risky or negative effects of sales promotions is that they can lead to a price orientation amongst customers. This is especially true if you overuse them or maintain discounts for an extended period. Customers psychologically connect the promotion price with the value of the product, and a price hike down the road may not work.

Inventory Reduction

Effective sales promotions lead to inventory reductions because customers buy more product. In fact, this is why companies hold them regularly at the end of a buying season. For example, when Halloween is over, you often see retailers discount decor and candy to make room on the shelves for other products. While this often results in a gross loss on the excess inventory, you at least get some revenue rather than throwing out expired or obsolete products.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.